A Glasgow-based director and consultant has been disqualified from acting as a company director for 12 years for the operation of an illegal Ponzi scheme.
Stewart Kennedy was disqualified by the Court of Session in Edinburgh, following an investigation by The Insolvency Service into Cost Reduction Services (2010) Limited (“CRS 2010”) and Cost Reduction Services (UK & NI) Limited (“UK & NI”).
The investigation found Kennedy caused CRS 2010 to take money from the public, promising “high returns from investing in a bill reduction advice business.”
Scott Crighton, an investigation supervisor with The Insolvency Service, said: “Mr Kennedy’s conduct fell well short of that expected of a company director.
“He behaved recklessly and placed his own interests above the interests of those who entrusted their investments to him. The Insolvency Service will not tolerate such behaviour and will bring all of its powers to bear in order to stamp it out.”
The court heard that Kennedy had been bankrupted twice and was discharged on the second occasion two weeks before incorporating CRS 2010.
He caused the company to invite members of the public to invest £15,000 apiece in an “Easyearn Franchise”, which was supposed to generate profits through fees paid by businesses and householders in return for advice on how to reduce their monthly bills.
However, Kennedy misled investors with “fabricated testimonials” and also “massively overestimated the potential returns”, as well as offering “worthless money-back guarantees that were never honoured”.
As a result, Kennedy had caused CRS 2010 to operate a Ponzi scheme by using newly invested money to pay older investors.
The court heard CRS 2010 received investments of £357,500 from franchisees, of which at least £71,000 was used for the personal benefit of Kennedy, almost half of it on holidays. Kennedy also received a further £34,000 in salary, expenses and commission, including £14,000 paid one week before he caused the company to cease trading.
A further £158,000 of cash withdrawals and un-receipted debit card expenditure could not be explained by Kennedy, who admitted to using the company’s bank account as if it were his own.